State regulators have reached a milestone in their efforts to streamline product regulation, with a centralized approval system for certain life and financial products on the verge of becoming reality.
After three years of lobbying, the required number of states — 26 — has signed onto the Interstate Insurance Product Regulation Compact and the compact is “good to go,” according to the National Association of Insurance Commissioners (NAIC).
The compact is supposed to provide insurers and states with a central filing system for life insurance, annuities, disability income and long-term care insurance products, promising to speed up their approval in multiple states. The system does not encompass property casualty products at this time.
Alaska became the 26th state to join the compact and this week Minnesota’s Legislature passed its Interstate compact bill, sending it on to the governor for signature. If signed by the governor, the other requirement of having a total of 40 percent of the national premium volume will be met and Minnesota will become the 27th state to join the compact.
“This is a remarkable result considering the short time frame,” said Wesley Bissett, senior vice president for government affairs and state regulation for the Independent Insurance Agents and Brokers of America. “Certainly as more states sign on there will be pressure for others to do so.”
“We are very excited about the success of the compact and commend the legislatures, governors and regulators in all the compacting states for understanding the importance of this cooperative interstate initiative,” said NAIC President and Maine Insurance Superintendent Alessandro Iuppa.
At the same time, Iuppa added, there is still work to be done, putting in “place the operations and processes for making the compact an operational success.”
The NAIC began the process of soliciting volunteer states in 2003 at a national meeting, but states were slow to sign on. State legislatures had to adopt authorizing language allowing the states to sign on to a compact not yet in existence.
“Getting lawmakers to support a legislative concept not yet a reality required a real leap of faith,” Bissett said.
According to Bissett, now that the 26th state has signed on, the compact can begin to establish an interstate commission to develop uniform product standards. The multi-state commission is to include one member from each member state. The commission would adopt a set of bylaws to govern its activities and a management committee of 14 members that would oversee the day-to-day activities of the compact. The management committee would include one member from each of the six largest states, four members from mid-sized states and one member from smaller states from regional zones. The NAIC hopes that the distribution of management committee members will assure a diversity of rules.
For proponents of state regulation of insurance, the success in creating the compact demonstrates the ability of the states to create a mechanism to enhance products speed to market and approval of filings.
Politically, with a backdrop of the push for federal regulation, questions arise about creating another bureaucracy. Once the commission is created, an office site will have to chosen, staff hired and a centralized database established. Although the commission will be independent from the NAIC, regulators will make the decisions.
To date the following states have joined the compact: Alaska, Colo., Ga, Hawaii, Iowa, Ind., Idaho, Kan., Ken., Md., Maine, N.C., Neb., N.H., Ohio, Okla., Pa., Puerto Rico, R.I., Texas, Utah, Va., Vermont, Wash., W.V. and Wyo.
The Interstate Insurance Product Regulation Commission plans to hold an open, public meeting on Tuesday, June 13, 2006, from 1 p.m. to 3 p.m. EST. This will be the first meeting of the Commission upon reaching its operational goal of 26 states. The meeting will be held at the Marriott Wardman Park, 2660 Woodley Rd. NW, Washington, D.C. 20008.
The commission is expected to consider formation of an initial management committee, publication of bylaws, an initial budget, staffing requirements and technology considerations. A full agenda will be posted to the NAIC’s Web site at least 15 days prior to the meeting.
To date any plans to create a similar compact for property/casualty products and filings have been shelved.
“Hopefully we can re-ignite discussion of a similar compact on the property casualty side with the success of this compact,” Bissett said.
The National Association of Insurance Commissioners contributed to this story.
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